Criminal investigations into Prime Minister Benjamin Netanyahu are all the rage on newspapers’ front pages, but the Israel Police and the Israel Securities Authority have been working overtime elsewhere, too.
No fewer than 17 of the roughly 540 companies listed on the Tel Aviv Stock Exchange are being (or have been) investigated in some form or other, whether for graft, theft, or, in one case, mounting an attack on a foreign country to demonstrate a drone.
The combined market cap of the companies embroiled in one investigation or another is around 200 billion shekels ($57 million), or close to a quarter of the TASE’s total market cap.
The latest publicly traded company to be subject to an official investigation is Housing & Construction Limited, a builder controlled by billionaire heiress Shari Arison, after police said they had detained four current and former employees on suspicion of bribery in Africa.
The police’s Lahav 433 fraud investigation unit said it, together with international law enforcement agencies, had for months been investigating allegations of bribery, money laundering and the falsification of documents. The company said it was recently notified by the World Bank that it planned to conduct an audit in connection with several of its projects in Kenya which the World Bank was involved in financing.
On Wednesday, a Housing & Construction’s foreign subsidiaries agreed with Israeli police to deposit 250 million shekels in a forfeiture fund without admitting to any guilt in the affair.
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The large number of companies that have faced securities probes in the last several years can at least in part be due to Shmuel Hauser, who was chairman of the Israel Securities Authority from 2011 until the end of last year.
His tenure was characterized by aggressive enforcement of securities law. Among the highest-profile probes was that of Nochi Danker, who had controlled the IDB group, then Israel’s biggest holding group. An ISA investigation into share manipulation ended in Dankner’s conviction in 2016 and a two-year prison sentence.
“Every decision to open a criminal investigation is a difficult decision, and I say that frankly,” Hauser said in an interview with TheMarker in January. “But the half-full glass is that no one is immune, and if someone does something, the authority will catch him sooner or later.”
His term ended with another major probe of the Bezeq group.
Long before the police said this week they were launching a criminal investigation into the Bezeq affair, the company itself was ensnared into a securities investigation. The ISA said in November it should lead to indictments for Shaul Elovitch and Stella Handler — the company’s controlling shareholder and CEO, respectively — as well as a number of other figures.
At the heart of the allegations is the claim that Elovitch helped engineer Bezeq’s purchase of its minority stake in their Yes satellite television joint venture at an inflated valuation of close to one billion shekels.
One unusual case involves Aeronautics Defense Systems, which the police have been investigating since November, just six months after it was first listed for trading. The company allegedly demonstrated the capabilities of an attack drone on Armenian troops for Azerbaijani officials.
Reportedly, two of the company’s drone operators refused to test the device against the Armenian position, but ultimately more senior people at the company did the deed. The drone missed its target. Most of the other details remain under a court gag order.
Teva Pharmaceuticals, the world’s biggest maker of generic drugs, has garnered attention for its disastrous 2016 acquisition of Actavis Generics, which saddled the company which huge debt just as the U.S. generics market was becoming difficult.
But while the company was engaged in massive layoffs and asset sales, it admitted in January to paying bribes in Russia, Ukraine and Mexico in order to boost sales. It agreed to pay $519 million to U.S. authorities as a penalty.
Teva employees paid bribes to a Russian government official to increase sales of its multiple sclerosis drug, Copaxone, the Justice Department said in its complaint. In Ukraine, the company paid bribes to an official to influence the government’s approval of Teva drug registrations, the Justice Department said. Teva’s Mexican subsidiary paid bribes to doctors employed by the government to prescribe Copaxone.
Teva has other legal problems: In the U.S., it is one of over a dozen makers of generic drugs under criminal investigation by the Justice Department for allegedly conspiring to raise prices.
A much smaller drugmaker, Kitov Pharma, saw its CEO, Isaac Israel, arrested a year ago amid ISA allegations that it misled investors about its flagship drug KIT-302, which treats osteoarthritis pain and high blood pressure. The company had recruited an independent committee to examine the results of its phase III trial for the drug, but with the CEO’s approval it filed reports in 2015 and 2016 that incorrectly gave the impression that the panel had been entirely satisfied with the results and that there was no need to continue trials or recruit more patients. Kitov even said it expected U.S. Food and Drug Administration approval for KIT-302 during 2016. In fact, the FDA only agreed to review the drug for approval in October.
Infrastructure company Danya Cebus, which belongs to Africa Israel Investments, it is suspected of bribing Knesset member David Bitan (Likud) to promote a building project in Rishon Letzion. CEO Ronen Ginsburg was arrested in January for bribery, money laundering and tax dodging.
Danya Cebus is one of Israel’s three big construction companies, building homes, offices and factories and infrastructure in Israel, the United States and Romania. Ginsburg’s arrest was the third time the company has run afoul of the authorities since February 2016, when it was investigated by the Antirust Authority.
The CEO of Mazor Robotics, which makes robotic-guided devices for spine and brain surgery, found himself under investigation for allegedly leaking inside information on a major deal with the U.S. medical technology company Medtronics, before the deal was reported. Since a May 2017 raid of Mazor’s offices, no action has been taken.
Willifood is a food importer whose former controlling shareholders and officers were accused of misusing the money of companies they control as collateral for loans from banks in Austria and Azerbaijan for their private companies. Charges have been filed.
In 2014, the owner of the B. Yair construction firm, Yair Biton, was arrested for conspiring with convicted mobster Yitzhak Abergil to steal money from the company. They and other figures were indicted; the trial is in process.
Finally, banks Hapoalim and Leumi fell afoul of U.S. authorities for helping American clients evade taxes in the previous decade.
In late 2014 Bank Leumi settled the case with U.S. and New York authorities by agreeing to a $400 million penalty. Leumi decided to move out of the overseas private banking business and sold operations in Switzerland and Luxembourg. The affair isn’t over: Six months ago, Attorney General Avichai Mendelblit ordered an investigation into Leumi’s former chiefs, including former CEO Galia Maor, and others bank executives who had helped U.S. clients with tax evasion.
Meanwhile, Bank Hapoalim and Mizrahi-Tefahot Bank are both being investigated by the U.S. and New York over similar tax allegations. Hapoalim has set aside 1.4 billion shekels in expectation of a penalty and Mizrahi-Tefahot has made provisions as well.